Western New York should foster high-growth sectors like electronics and automobiles to benefit from the manufacturing rebound that has lifted other Great Lakes regions, according to a study by the Buffalo Niagara Partnership.
While parts of the old Rust Belt have seen a factory revival in the 1990s, Buffalo and Niagara Falls have largely missed out, the report said.
Factory jobs grew nationwide last year, but shrank 1 percent in the metropolitan area that includes Erie and Niagara counties.
The study is based on statistics from the state Labor Department, U.S. Federal Reserve and the U.S. Census Bureau.
Although the factory sector faces daunting hurdles, "manufacturing in upstate continues to be one of the largest sectors of the economy and could play a vital role in rejuvenating the area," the study said.
Area production workers earned an average $17.50 an hour in July, according to the state Labor Department. The relatively high pay makes the sector, with about 88,000 jobs, an important economic engine for the region.
While the report repeated familiar economic drawbacks -- high local taxes and energy costs -- it also said that part of the growth gap is the result of the area's industrial mix. Buffalo-Niagara's manufacturing sector is weighed down by industries that have seen relatively slow growth rates, the study said.
Makers of factory equipment are by far the region's largest sector, with 15 percent of manufacturing jobs in 1995, the study said. Output of industrial equipment grew during the first half of the 1990s, but only about half as fast as in electronics manufacturing, and only one-third as fast as motor vehicles, the Partnership study said.
Food, another relatively slow-growth sector, is a large employer here with 7 percent of manufacturing jobs. Regions with a different mix of manufacturing have performed better than Buffalo. In Michigan, where manufacturing jobs are growing, the largest sector is motor vehicles and equipment, with nearly 15 percent of manufacturing jobs. In Buffalo, the auto industry makes up 7.4 percent of manufacturing jobs.
California's trump card is electronics and electrical equipment, with 12 percent of manufacturing employment, vs. 4.4 percent in Buffalo-Niagara.
The bad news is that regions are largely forced to play with the industrial hand they're dealt.
The Niagara Frontier's industrial mix "is not going to change very quickly," said Richard Deitz, a Federal Reserve economist in Buffalo. "Regional economies begin to specialize in certain things -- usually there's a certain advantage in a location." The concentration snowballs as the industry's supply base and its pool of skilled workers grows.
But other regions have adopted specific policies that bolstered manufacturing jobs, the Partnership study said. Among them:
School-to-work programs. Michigan and Wisconsin adopted programs to train a factory-skilled work force, mixing classroom work with on-site training.
Restrained government spending and regulation. Curtailed budgets have reduced the tax burden on Midwest manufacturers below other regions, including taxes based on energy use.
Regional development approaches. Multistate coalitions in the Midwest helped manufacturers by standardizing regulations and development policy across state lines.
Many initiatives aimed at factory-sector growth are already under way here, the study said.
"The seeds appear to have been planted for upstate to leverage its manufacturing strength into economic growth," the study concluded.
Work force development programs and regional initiatives to lure electronics manufacturers are already under way.
Partnership President Andrew J. Rudnick said the study "shows that the components to manufacturing revival are in place here."
Stephen Kagann, economist for Gov. Pataki, said he believes a turnaround is on the way, regardless of the industrial mix. Other upstate cities saw a manufacturing rebound in 1998 that Buffalo and Rochester missed because of the Asian economic crisis. Now that Asian currencies are stronger, the import competition should cool off while collapsed export markets come back, he said.
"I really believe that the lower dollar is going to help Buffalo and Rochester," Kagann said. The Japanese yen has gained 16 percent against the dollar since its low point in March.
Factory jobs fell from about 30 percent of regional employment in 1970 to 15 percent by 1998, mirroring a national decline. Although jobs are down, manufacturing output remains at about one-third of the U.S. economy.